Pub. 5 2017 Issue 1

www.uba.org 12 A gainst the backdrop of a multifamily construction boom across the Wasatch Front, the Utah State Legislature last year passed Senate Bill 22, amending the no- tice requirements for foreclosure of residen- tial rental properties and clarifying the rights of residential tenants following foreclosure. The bill, which went into effect May 10, 2016, requires that, for properties being fore- closed with nine or more residential units, notice of the foreclosure be posted in at least three conspicuous places on the property, rather than only two places as previously required. If the property has fewer than nine units, notice is required to be posted on the primary door of each dwelling unit. Alterna- tively, regardless of the number of dwelling units, notice of the foreclosure can be mailed to the occupant of each unit on the property to be sold. In addition, Senate Bill 22 amended the stat- utory form of notice required to be provided to residential tenants and clarifies the rights available to residential tenants following foreclosure. Previously, the statutory notice form notifying tenants of the foreclosure referred to tenant rights under federal law to continue to occupy the property until the later of the expiration of the lease agreement term or 90 days after receipt of notice to va- cate. However, the federal law which granted these tenant rights (The Protecting Tenants at Foreclosure Act of 2009) expired at the end of 2014. As a result, beginning in 2015, tenants receiving the statutory form of notice were informed of rights under a federal law which no longer existed, leaving the tenants’ actual rights following foreclosure unclear. Senate Bill 22 resolved this uncertainty by creating residential tenant protections under Utah law similar to those previously granted under The Protecting Tenants at Foreclosure Act. Under the new state law, a residential tenant occupying the property under a bona fide residential lease may continue occupying the property following foreclosure until the later of the expiration of the lease agreement or 45 days after service of a notice to vacate. These rights do not apply to a tenant that is also the trustor under the foreclosed deed of trust—or the trustor’s child, spouse or par- ent. However, outside of the trustor-tenant scenario, so long as a tenant continues to pay rent and comply with the other requirements of the bona fide residential rental agreement, the purchaser at the foreclosure sale is gen- erally prevented from terminating the lease or the tenant’s occupancy of the property. Only if the new owner intends to occupy the foreclosed premises as a primary residence can the bona fide tenant’s lease agreement and occupancy of the property be terminat- ed, although the 45-day notice period still applies. From the perspective of a lender foreclosing on residential property in Utah, Senate Bill 22 provides helpful clarity following the expi- ration of The Protecting Tenants at Foreclo- sure Act on when and under what circum- stances a residential tenant’s occupancy of a property may be terminated. Moreover, by cutting the required notice period in half to 45 days, the potential burden of tenants occu- pying the premises after foreclosure, even if the tenants are not paying rent, is significant- ly ameliorated. Lenders anticipating a non-judicial foreclo- sure must also be aware of additional notice requirements which apply to both residential and non-residential properties. First, to begin the power of sale foreclosure process, the trustee under the deed of trust must file a notice of default in the county records where the property is located. The notice of default, among other factors, must set forth the nature of the breach of the secured obli- gation, and must also specify that the trustee has elected to sell the property to satisfy such secured obligation. Three months after the trustee records the notice of default, the trustee continues the foreclosure process by giving written notice of the time and place of the sale via publication of the notice of sale on the Utah Legal Notices website (https:// www.utahlegals.com) at least 30 days before the sale, and once per week for at least three weeks in a newspaper of general circulation in the county where the property is located, with the last publication occurring at least 10, but no more than 30, days before the scheduled sale. In addition, for at least 20 days before the scheduled sale, notice of the sale must be posted on the property and in the applicable county recorder’s office. A signed copy of the notice of default and the notice of sale are each required to be mailed by the trustee via certified or regis- tered mail, return receipt requested, to the trustor and any other party which has filed Amendments to Utah Foreclosure Notice Requirements – Traps for the Unwary Apartment, Condominium and Residential Housing Lender By James H. Jones and Tanner Frei